City revises tax bills for owners who saw unexpected increases

Just three months after Baltimore officials caused an uproar by unexpectedly raising the property taxes of 315 owners, the city is once again revising those bills.

Michael Plaisted saw the July tax bill on his Ridgely's Delight condo jump from about $1,000 to $2,000 after the city concluded that state officials had been granting excessively large breaks for rehabs of historic properties. After he challenged the city's math, his municipal tax bill fell — all the way to zero.

"What's wrong with this city, and why can't we do things right?" said Plaisted, a financial analyst for the Defense Department.

The city has released few details about the reason for the recent revisions or the outcome for owners, all of whom have historic tax credits. City Councilman James B. Kraft said finance officials told him the changes would largely undo the tax increases many of the homeowners saw on their July bills, possibly putting them in line for refunds.

For some owners, the long-term impact of tax revisions could be substantial. Because the historic tax credit lasts 10 years, the increases that appeared on the July bills could exceed $15,000 over time, in some cases.

So far the city has modified bills for 200 of the 315 properties, and officials are waiting for the state to supply information about 100 others, according to Kevin Harris, a spokesman for Mayor Stephanie Rawlings-Blake. That means the city could wind up recomputing nearly all 315.

"It's a mess," said Kraft, who has pressed the Finance Department to resolve the complicated issue in favor of affected homeowners.

Asked if people's taxes have fallen as a result of the revisions, as Kraft has stated, Harris said in an email Friday that officials didn't know: "The City does not track the changes in rebills."

The latest revelations come amid growing scrutiny of the Finance Department. The Baltimore Sun reported last month that commercial properties were underbilled by more than $700,000 over several years due to wrongly calculated Enterprise Zone tax credits.

And in recent years the city failed to collect more than $2 million because of errors in other tax programs, The Sun has found.

Rawlings-Blake has said the persistent errors are a "serious problem," but she has rejected calls for an audit of the Finance Department, noting that billing oversight changes are being implemented. Councilman Carl Stokes has suggested that the city consider turning tax collection over to a private firm.

Meanwhile, the city recently altered the rules governing Baltimore's historic credit program. Until this year, the rules guaranteed that owners would always be taxed on the pre-renovation value of their home — a reflection of the program's aim to spur and reward investment in older structures. But now, if a property's value falls far enough, the owner can avoid paying any city property tax.

This is what happened to Plaisted. In fixing his erroneous tax increase, city officials realized his condo's value had dropped so much since it was rehabbed that he owed no city tax this year — not even on the condo's $45,000 pre-renovation value. He recently got a refund for taxes he paid in July.

Kraft said that change makes "absolutely no sense." Stokes, chairman of the taxation committee, called it a "bogus" move that will needlessly cost the city.

Harris, the mayor's spokesman, said city lawyers felt the change was required under state law.

Under the historic credit program, the value of approved home renovations goes untaxed by the city for a decade.

But in explaining the surprise increases on the July tax bills, city officials said the state Department of Assessments and Taxation had exempted too much value, leading to inflated credits that deprived the city of rightful taxes. While the city said it wouldn't try to collect back taxes, owners would have to pay more going forward.

The city also said 241 owners hadn't been getting large enough tax breaks under the program and would owe less tax starting this year. In all, more than 1,250 city properties are receiving a historic credit this year.

State officials have said city officials bear partial responsibility for some past errors and that certain issues cited by the city reflected different approaches to computing credits — not necessarily mistakes. This year the city took over the job of calculating the credits from the state.

Now, according to Kraft, fresh calculations done since July show the city never should have raised taxes on many of the 315 properties. "Many of these people will be made whole because the recalculations are putting them where they would have been," he said, adding that the city has not shared with him its methodology.

"They are going back and recalculating every single one of those bills," said Kraft, who represents Canton, Fells Point and other parts of Southeast Baltimore where comprehensive housing rehabs are common.

Harris, the mayor's spokesman, denied The Sun's request for a list of the 200 properties whose tax bills have been rebilled, saying the city didn't have such a report. Harris said the bill revisions are part of ongoing, routine reviews.

"The City is continually rebilling accounts as new assessments, revised assessments and revised Homestead Credits are received," he wrote. When historic credits are part of the bills, he said, the credit also is reviewed.

In Plaisted's case, the city used the wrong post-rehab value — $300,000 instead of $450,000 — when it initially claimed he owed more tax than he had been paying.

Kraft has urged affected homeowners to pay only what they did last year so they would not need to seek a city refund. For some owners it's too late, said Tammy Wase, a real estate agent in Canton, because mortgage companies often pay taxes automatically out of escrow accounts.

So even if the city promptly issues refunds for taxes already paid, some owners could still have problems, she said. The July increases could throw escrow accounts out of whack, and it could take months for monthly mortgage payments to fall to prior levels.

"It's always better to fix something that was wrongly done," Wase said of the bill revisions. "However, this was an unnecessary hardship and heartache to put on people."

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